How on-site health centers can help employers control medical costs Featured

8:00pm EDT April 25, 2010

Many health plan sponsors are frustrated by high group medical costs and are losing sleep over the potential cost implications of health care reform.

Some plan sponsors adopt a short-term solution by shifting costs to employees in the form of high-deductible plans that result in increased out-of-pocket costs, but that can damage morale when limited wage increases are consumed by higher medical plan contributions and out-of-pocket expenditures, says Joseph Marlowe, senior vice president, Aon Consulting.

“Cost shifting to employees does not address two root causes of the medical cost problem,” he says. “The majority of the increase in health care spending during the past 15 years is due to unhealthy behaviors contributing to more chronic disease. In addition, the medical delivery system is not efficient.”

Progressive plan sponsors are exploring on-site health centers in response to both challenges. Plan sponsors with as few as 700 employees in one location can generally make a business case for having a full-time clinical presence on site, while those with fewer employees are so attracted to the offering that they resort to a part-time clinician.

Smart Business spoke with Marlowe about how having a clinical presence on site can not only benefit the employees, but the employer, as well.

What does a typical on-site health center offer?

On-site health centers mimic a primary care (e.g., family practice) physician’s office, with one or more treatment rooms and basic diagnostic and laboratory equipment. It may be staffed with physicians and/or nurse practitioners and technicians. Centers serving a limited patient population may rely upon a nurse practitioner as the first-stage clinician. The typical on-site medical center offers:

  • Routine medical care, including diagnosing medical conditions, prescribing medications, ordering radiology and laboratory studies, performing physical exams, repairing lacerations, drawing blood, performing minor office procedures such as biopsies, and conducting heart rate and blood pressure checks, etc.
  • Immunizations
  • Preventive screenings Health education, consultation and wellness (diabetes education, nutrition counseling, etc.)
  • Chronic condition management
  • Occupational health

Who operates the on-site health center?

Most plan sponsors contract with a management firm that hires clinical staff and provides the center with supplies, equipment and information systems. These firms are paid a management fee subject to a multiyear agreement.

Most decisions to outsource the service are driven by two primary considerations — privacy concerns on the part of employees who fear the use of confidential medical information in employment matters and minimizing medical malpractice exposure.

What types of savings can a company realize by having on on-site center?

Savings result from improved health status, which reduces hospital admissions and emergency visits. On-site clinicians can also bring efficiency by controlling referrals to specialists, who tend to order more tests. Savings can also come from avoiding lost work time for community-based physician visits. Financial break-even is often achieved in the second or third year. However, not all on-site health centers deliver savings.

A number of variables influence savings, including the number of employees in the location, plan design incentive to use the health center, trust in the on-site clinician, attractiveness of office space and communication. Ultimately, high usage leads to savings, while low usage results in negative return on investment. A prudent, calculated process must be employed to initially affirm feasibility, followed by a thorough competitive bidding process to weigh alternatives and select the best business partner.

What are key issues to assess before deciding to implement an on-site health center?

  • Will the on-site center deliver savings? Employers must conduct an independent feasibility analysis to ensure that they will receive return on investment.
  • Is there adequate physical space available for an on-site health center?
  • Does the program financing make sense?
  • Will the local culture accommodate the on-site center? Will employees make use of the resources?
  • Is senior management prepared to provide visible support and encourage use?
  • Can senior management tolerate the multiyear financial commitment?

Can having an on-site center improve quality of care for employees?

By providing timely access to care and educating patients about their medical conditions, on-site health centers can improve quality of care. Most on-site health center clinicians devote extra time to patient education by limiting the number of patient appointments, making possible a more thorough and personalized experience. This may lead to better adherence to recommended treatment guidelines and improved clinical outcomes.

Besides savings, are there other advantages?

Some plan sponsors report improved work force commitment. Employees benefit financially through reduced or eliminated copayments or deductibles for office visits. Today’s time-stressed work force often struggles to balance job demands and family life. With time at a premium, the convenience of an on-site center sends a message that the plan sponsor is responsive to a stressed and overcommitted work force. If the service elements mesh and the plan sponsor capitalizes on the message, employers can use the on-site center as an employee attraction and retention feature. Some plan sponsors invite covered dependents to use the health center.

Joseph Marlowe is senior vice president of Aon Consulting. Reach him at (610) 834-2137 or